Forging a future through forging partnerships

23 Mar Forging a future through forging partnerships

Thomas Groß, CEO, Helaba, discusses how successful management of the pandemic crisis has laid the groundwork for future growth and competition in the region.

Would you tell us about the key strengths that have helped Hessen’s financial sector to be so successful? What differentiates the sector from other financial hubs in Europe and beyond?

There are several reasons why the greater Frankfurt area has been so successful. One is that Frankfurt has a longstanding image as an international city. For centuries, Frankfurt has been at the crossroads of global trade and the city boasts an outstanding international community. Obviously, we are also known for hosting trade fairs and having a booming financial sector.

Almost 7.5 percent of Hessen’s GDP comes from financial services, around twice the share of Germany as a whole. The number of employees in the industry has increased over the last few years, in contrast to the rest of Germany. Brexit and other recent developments also act as drivers for further growth and I am sure that, in the next decade, Frankfurt will continue to benefit from this.

What does the bank owe to its historic and recent success? What major milestones has the company passed and what is its growth strategy going forward?

2021 was a year of rather rapid growth for Helaba, primarily because we have been expanding our activities for many years as a highly diversified financial services company. Naturally, we retain our wholesale corporate banking activities, enabling us to be an important presence for companies here in Hessen, but we are also a major player in real estate and project finance. Further, future needs for net zero carbon investment will create enormous business opportunities in real estate, corporate banking and renewable energy.

We also serve about 40 percent of all savings banks in Germany; not just in Hessen, but in North Rhine-Westphalia and Brandenburg, too. Essentially, our business spans the whole country. Five strategic affiliates are responsible for other key activities.

Then we have Helaba Invest, an institutional asset manager with over $221 billion in assets. Furthermore, our portfolio also includes Frankfurter Bankgesellschaft, offering wealth management, private banking, funds and asset management services, with offices in Zurich and Frankfurt.

Finally, we operate two real estate companies, which demonstrate our conviction that diversification is the best way to tap into future growth opportunities. We began to move from less capital-intensive businesses toward more fee-based activities several years ago and this trend is now accelerating. Generally, lenders stick to what they are traditionally known for: providing loans. Indeed, this is where our roots are. Although we are still happy to lend, regulations and an environment of negative interest rates have made this segment extremely difficult. In response to that, we decided to expand our fee-based activities, which have since doubled from a share of only 20 percent to 40 percent of our total business volume. Our aim is to make this half our activities in future. This widely diversified growth strategy beyond typical financing is essential and allows us to streamline our growth while still maintaining our success as a lender.

What impact has COVID-19 pandemic had on Helaba and what has the bank done to support the greater economy of Hessen and beyond?

Our business was directly impacted in the spring of 2020, when a lot of our customers were in lockdown. However, within the first two weeks of the pandemic, together with the government of Hessen, we began creating tailor-made support schemes for many industries and companies, especially for small- and medium-sized enterprises. That is why we were able to partly cushion the blow of Covid-19 and, as a result, saw far fewer insolvencies and credit defaults than expected. In fact, this was thanks to efforts across Germany, but programs launched in Hessen were particularly helpful. Hessen’s own development bank, WIBank, which is also part of Helaba, worked day and night with new IT systems to set up these programs at very short notice. This meant that funds were disbursed to thousands of companies at an early stage of the crisis in the spring of 2020, sending out a strong message that we, Helaba and WIBank, are available as a partner to the government as well as to our companies in the region. This also opened up a clear path to recovery for us which has brought some excellent results.

But of course, the current year for the financial sector is especially dominated by the Russian attack on Ukraine and all its possible consequences. We share the view that this is a blatant violation of international law and a serious breach of human rights and of all the values that are important to us. For us as Helaba, it goes without saying that we will consistently implement all sanctions adopted by the German government and the European Union. In addition, we have suspended new business with Russia. Irrespective of these imponderables, we are firmly convinced that our broadly diversified business model and the consistent implementation of our strategic agenda mean that we are well prepared for the challenges of 2022.

What sustainable initiatives is Helaba involved in and what role do financial services entities play in bringing about circular economies and lowering carbon emissions?

My colleagues and I are convinced that moving to a circular economy is the only way forward. Two years ago, we set up Helaba Sustained, which is a groupwide initiative in which we have defined measures to reduce our own carbon footprint and develop a strategy for sustainability. More importantly, we have put together a new dedicated team for our corporate customers, known as the ESG Advisory Team. They provide consultancy services on potential ways forward for our clients, whether with sustainability-related loans, green bonds or sustainable bonds.

Our activities in a number of sustainability initiatives, both in Frankfurt and with the government across Germany, form the third strategic pillar. These initiatives relate to real estate and financing activities, where we are also a founding partner of ECORE. We are partnering with our customers and playing an active role in many standard setting and product development initiatives, but also some training initiatives for our employees.

How significant has the digital revolution been in the bank’s operations? How has the company bridged the gap between flexible fintechs and its more traditional systems to incorporate new disruptive fintech technologies?

You may know that we were a founding partner of Frankfurt’s TechQuartier. We invite start-ups to become our competitors because we know we can learn from them, partner with them, and that the entire community will benefit from this. Right from the beginning, we have been pushing for an ecosystem made up of financial services, start-ups and tech companies.

Integrating a fintech mindset into a large organization such as ours proved an enormous challenge. That is why we launched Helaba Digital six years ago, an in-house entity whose aim is to digitize the bank as a whole and create new business opportunities. We have also made venture capital commitments to a number of fintechs in order to gain access to new ideas and invested large sums in our own IT infrastructure as well. Specifically, we have committed hundreds of millions over the next five years in order to make our systems agile and flexible and to interface with innovative, emerging platforms. Digitization has already had a colossal impact on the sector, especially on retail banking, but it is also filtering down to corporate and wholesale banking. Here, we have launched web portals where we can interact with our customers through processes.

What key partnerships has the bank made to support its growing international footprint?

We have defined a two-pronged strategy for Helaba. In view of the aforementioned initiatives, Helaba is ideally positioned to grow as a standalone business while also partnering with businesses outside the industry in the future. This is why we have established partnerships with technology companies and other banks. Our cooperation with LLBW, for example, is not a merger but rather a strategic partnership in specific areas. We are Germany’s top two Landesbanks, but we both provide the S-Group with the same products and services. After long and in-depth discussions, we decided it would be better to bundle some activities in Stuttgart with LLBW and others with Helaba. As a result, we are now the only one providing international trade finance and cash management services for all the savings banks. This agreement does not include direct client-focused activities and is only related to business with savings banks. Essentially, we are competitors on the one hand but partners on the other. This strategic partnering logic is something we will drive further, both within and outside of banking and is extremely supportive of Helaba in these growth initiatives. Obviously, they expect their annual dividends, but they are also accommodating and allow us to grow with our retained earnings. That is why we are still on a growth trajectory in the business segments I have mentioned.

What are your priorities going forward for Helaba and for the greater banking industry in Hessen? How would you like the ecosystem to look in the future and what can be done to get there?

A vital part of our strategic agenda is centered on growing with our customers. When our customers are successful and growing, then so are we. The essence of this approach includes diversification both in terms of our business model and of our people. Hessen, with its global community, is very well equipped for diversification in the unique skill set, mindset and culture of all our employees. We need to leverage the diversity we have much more strongly for our future success. If we can do so, there are plenty of opportunities for Helaba, but also for Hessen and the city of Frankfurt. There is no single route to success. You need to be flexible, and you can be flexible if you have an open mindset with open-minded people, an open-minded city and an open-minded culture. That is why I am pushing so much for diversity, not only in our business model, but also in terms of the cultural backgrounds of our staff.

Do you have any final comments for the readers of Newsweek magazine?

In Frankfurt you can expect to enjoy long-term, reliable partnerships, not only from Helaba but also from our government. We enthusiastically welcome new competitors and market newcomers to build the future together. The financial center will have an absolutely key role in financing the path to net zero and the circular economy. This is a tremendous opportunity for us to provide services that benefit society as a whole. Finally, it is simply a wonderful place to live.